Clarity over VAT on transactions spanning 31 December
30 December: HMRC has published guidance on the VAT treatment of transactions that are ongoing and goods that are in transit between Great Britain and the EU when the Brexit transition period ends on 31 December 2020.
Published on 23 December, the public notice outlines provisions in relation to VAT at the end of the transition period.
The guidance focuses primarily on goods that are in transit between the EU and Great Britain at that time, but also provides information on call-off stock and for fulfilment houses storing goods imported before the end of the transition period.
It also covers VAT treatment of certain supplies of financial services and other services between the UK and EU.
The notice, parts of which have the force of law, confirms that goods received in Great Britain on or after 1 January 2021 will be subject to UK customs procedures and import duties, including import VAT.
It provides guidance for organisations on a range of scenarios, including where acquisition VAT was paid ahead of the receipt of goods and where goods were received ahead of the end of the transition, but where acquisition VAT is not due until afterwards.
In the first scenario, the notice confirms that such goods could be subject to acquisition VAT and import VAT, and that the GB business is required to account for import VAT by using the postponed accounting scheme. It also outlines what businesses must do if they are not able to use the postponed accounting scheme.
In the second scenario HMRC confirms that acquisition VAT will still be due as though the acquisition took place before the end of the transition period.
Alongside issuing specific information on the transitional arrangements for the Tour Operators’ Margin Scheme, the notice confirms that for services in general where legislative changes result in potential double taxation – services being taxed at the actual tax point and the basic tax point – the basic tax point will apply.
In relation to financial services, the supply of certain services will be eligible for a VAT refund under the Specified Supplies Order after the end of the transition period. The notice confirms that in the specified circumstances input tax incurred after the end of the transition period will be recoverable, but that incurred ahead of 31 December will not be.
It should be noted that, under the Northern Ireland Protocol, the current rules for movements between the UK and the EU will continue in relation to movements between Northern Ireland and the EU.